Zonda released the New Home Pending Sales Index (PSI) for October 2020. The New Home PSI shows pending sales increased month-over-month and year-over-year across the United States. The index is a leading residential real estate indicator based on the number of new home sales contracts signed across the country.
The New Home PSI came in at 168.9 for October, representing a 45.8% increase from October 2019. On a month-over-month basis, new home sales rose by 0.8% from September.
"Housing demand is not letting up," says Ali Wolf, chief economist at Zonda. "The best thing about the strength in today's housing market is that it is largely fueled by real families looking to take advantage of low mortgage rates to fulfill their American Dream."
Pending new home sales trended above October 2019 levels in every top market across the country.
The best new home markets in October were Raleigh, Denver, and Jacksonville; these were the same top three as last month. Builders in these markets are selling through homes at an exceptional rate, but they've also been busy pulling new permits. Raleigh, Denver, and Jacksonville fall within the top 15 of major markets with the most single-family permits pulled year-to-date. Furthermore, the local economies in Denver and Jacksonville are outperforming the national average, with an estimated 60% and 65% of all the jobs lost in March and April that are recovered, respectively. The national average is 54%.
"As COVID-19 hospitalizations rise and parts of the country start shutting down again, housing plays an even greater role in our life," says Wolf. "Looking into 2021, however, some builders are expressing caution over the sustainability of the current growth rates due to limited inventory and some affordability concerns."
New home data is susceptible to outsized swings in contract activity based on shifts in the number of actively selling communities. As a result, Zonda normalizes the data to ensure consistency across the index. The New Home PSI blends the cumulative sales of active or recently sold-out projects with the average sales rate per community, which adjusts for fluctuations in supply. Furthermore, the New Home PSI is seasonally adjusted based on each markets' specific seasonality and removes outliers. The index is baselined to 100 for June 2016. Today's national New Home PSI is 69% above the base level.
The next Zonda New Home PSI press release, featuring November 2020 data, will be issued on Monday, Dec. 21, 2020 at 9 a.m. ET.